This paper provides an overview of the most important structured finance instruments in the context of the development of the financial turmoil that started in the third quarter of 2007 and continued into 2008. These financial market tensions were triggered by concerns about exposures of...

According to the Reserve Bank of Australia (2006) the increased supply of Commercial Mortgage-Backed Securities (CMBS), with a range of subordination, has broadened the investor base in real estate debt markets and reduced the commercial property sector’s dependence on bank financing The CMBS...

This study investigates the effect of preferred stock on the credit ratings assessed by professional credit analysts. Preferred stock inherently contains both features of debt and equity financing. Hence, the nature of preferred stock has presented a puzzle to the efforts of accounting...

Bankai, išduodami paskolas juridiniams asmenims, jas apdraudžia. Tačiau tai yra tik vienas paskolos gavėjo kreditingumo įvertinimo proceso elementų. Norint sumažinti paskolų išdavimo riziką bei probleminių paskolų skaičių banko paskolų portfelyje, būtina atlikti išsamią...

The roots of the 2008 financial crisis are often traced back to the collapse of the housing bubble. The factors that precipitated the crisis, and propagated its effects on firms and consumers to produce an economic contraction, are still the subject of ongoing debate among academics, policy...

An increase in the credit rating on an organisation?s debt is generally perceived positively, as higher credit ratings are, in the main, associated with lower perceived volatility in the market value of the assets of the entity that has issued the debt. If banks price their assets to realise a...

The role of economic capital has grown significantly in recent years. Although not a regulatory requirement, an increasing number of financial institutions use economic capital for such purposes as measuring and managing the performance of people, products, risk exposures, and to manage and...

All banks must hold capital equal to the minimum regulatory requirement. However, in many cases the level of regulatory capital diverges from the actual (economic) capital held by banks. A bank's actual capital is typically linked to a target credit rating, which is in turn determined by the...

This paper develops a framework for examining the impact of changes in the solvency standard of a bank (target credit rating) on the pricing of bank assets. We show that the decision of a bank to increase its solvency standard increases the price of bank assets to the extent that a bank prices...

The aim of this thesis is to thoroughly study structural default models based on jump-diffusion processes. Jump-diffusion models were first proposed by Zhou (2001), who also showed that these models have several desirable properties, most important, positive short-term spreads. On the other...